French industrial giant Alstom has been placed on the Norwegian Government Pension Fund’s watchlist by the Finance Ministry because of corruption risks.
“The Ministry of Finance has decided to put Alstom S.A. on its observation list due to the risk of gross corruption in the company’s operations,” the ministry said in a statement. The fund’s Council of Ethics will monitor the company for four years.
The fund has a 2.14% stake in the company worth NOK1.8bn (€233m) as at the end of 2010, according to the fund’s holdings data.
The Ministry said Alstom is currently the target of legal proceedings in many different countries, and that the outcomes of these proceedings are not yet clear. Last month an Alstom subsidiary was ordered to pay CHF39m in fines and compensation to settle a long-running corruption case in Switzerland. It has also been investigated by authorities in Mexico and France.
Alstom has been under scrutiny from investors for various reasons. The Ethical Council of the Swedish AP funds has called for the company to end its involvement in a tram project linking Jerusalem and the occupied territories. And it was excluded by Norwegian investor KLP from its index portfolio for alleged violations of human rights at a Sudanese hydro-power project in 2007.
Dutch pension fund manager PGGM voted against Chairman and CEO Patrick Kron at the company’s AGM this year over governance concerns.“We will have a low tolerance for corruption instigated after the company was put on the observation list,” said Minister of Finance Sigbjørn Johnsen. Norway’s Ethics Council had recommended excluding Alstom in December last year.
The ministry also said that it would exclude US-based FMC Corp. and Canada’s Potash Corp. of Saskatchewan (Potash) from the fund’s investment universe for “serious violations of fundamental ethical norms” stemming from their purchases of phosphate from the troubled Western Sahara.
The ministry instructed Norges Bank to sell its shares in the companies in September, which has now been completed. The fund held NOK300m in FMC and NOK1.57bn in Potash.
In addition, the ministry said it had decided not to follow the Ethics Council’s recommendation to exclude Chinese oil giant PetroChina.
At issue were the Burmese operations of PetroChina’s parent firm China National Petroleum Corporation (CNPC), whose Southeast Asia Crude Pipeline Company subsidiary is involved in pipeline construction.
“The case raises some fundamental questions,” the ministry says – noting that PetroChina itself is not directly involved in the unethical activities. It disagrees with the Council’s assessment that PetroChina and CNPC should be regarded as a single entity.